2017 (9) TMI 1180 - AT - Central Excise

Clandestine removal - specific plastic compounds known as fillers - Revenue entertained a view that non-duty paid fillers were supplied by the present appellant M/s. Premium Poly Links and the entries made in the ledger under the name of M/s. Premium Poly Links relates to the present appellant - Held that - the Revenue s case is solely based upon the ledger recovered from KPI s premises. Admittedly, the appellant is supplying fillers to M/s. KPI. However, the said ledger is captioned as Premium Poly Links , whereas, the appellant s name is Premium Poly Alloys . Not only that, the entries in the said ledger describes the goods as C40, T10, C Bages or T Bags, whereas, the goods are being described by appellant in various invoices as Premium Fab 715 , PS 503 etc. It is well settled law that the allegation of clandestine removal are required to BE supported by production of sufficient evidences to establish the clandestine manufacture and clearance. Admittedly, no such evidence stand produced, Further, during the visit of the officers in the appellant s factory neither any unaccounted raw material nor final product was found nor any incriminating documents recovered. No doubt, that Revenue is not expected to prove its case by mathematical precision by establishing and proving each and every link but some evidence indicating such clandestine activities is required to be adduced by them. Demands cannot be confirmed on the basis of entries made in the records of third person. The confirmation of demand of duty on the company cannot be upheld. For the same reasons, penalty imposed upon the appellant as well as upon the General Manager is required to be set aside - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Alleged clandestine removal of goods without payment of duty.
2. Confirmation of demand and penalties imposed on manufacturing unit, partner, and General Manager.
3. Discrepancies in ledger entries recovered from third-party premises.
4. Lack of corroborative evidence supporting Revenue's case.
5. Applicability of settled legal principles regarding clandestine removal.

Analysis:
1. The case involved the alleged clandestine removal of goods without duty payment by the manufacturing unit, leading to the initiation of proceedings based on a show-cause notice proposing a demand of ?9,55,201. The original adjudicating authority confirmed the demand, penalties on the partner and General Manager, which was partially upheld by the Commissioner (Appeals). The appeals were filed challenging the penalties and demand confirmation.

2. The appellant contended that the Revenue's demand was solely based on a ledger recovered from a third-party premises, KPI, which did not belong to them. They argued that no duty liability can be imposed based on records from third-party premises without corroborative evidence. The appellant maintained that all transactions with KPI were reflected in their statutory records, and the Revenue failed to produce evidence supporting clandestine removal allegations.

3. The Revenue, represented by the Departmental Representative, reiterated the lower authorities' reasoning, emphasizing the entries in the ledger from KPI's premises as evidence of goods supplied by the appellant. They sought the rejection of the appeal.

4. Upon reviewing the submissions and orders, the Member (Judicial) found discrepancies in the ledger entries recovered from KPI's premises, noting differences in company names and product descriptions. The Member highlighted the necessity for the Revenue to provide evidence supporting clandestine activities, as established legal principles require corroborative evidence for allegations of clandestine removal. The lack of substantial evidence, unaccounted raw materials or final products during inspections at the appellant's factory led to the conclusion that the demand confirmation and penalties imposed were not sustainable. Citing relevant legal precedents, the Member set aside the impugned order, allowing both appeals with consequential relief to the appellants.

This comprehensive analysis of the judgment details the issues, arguments presented by both sides, and the Member's reasoning based on legal principles and evidentiary requirements, resulting in the decision to set aside the demand confirmation and penalties imposed.